Glencore expands bond buyback as manages debt

The logo of commodities trader Glencore is pictured in front of the company's headquarters in the Swiss town of Baar November 20, 2012.
REUTERS/Arnd Wiegmann/File Photo

LONDON Miner Glencore has increased the size of a bond buyback tender to $1.49 billion from $1.25 billion, it said on Tuesday, seeking to seize on favorable conditions to reduce its debt burden.

Miners, which racked up high levels of debt last year after commodity prices crashed, are in a much stronger position, helped by a commodity rally and some asset sales.

Investors are also more willing to take exposure to the sector, which has rallied strongly as its dollar-denominated earnings offer shelter from a weaker pound and the chance of positive returns in an environment of ultra-low interest rates.

In a statement on Tuesday, Glencore said the tender offer, which began on Oct. 3, would expire on Oct. 31 for nearly $1.5 billion in notes, up from a previously announced $1.25 billion.

Industry sources said the measure would reduce the amount of debt maturing each year.

In September this year, Glencore announced its first eurobond issue since the 2015 commodity price crash. It was heavily oversubscribed.

David Neuhauser, managing director at U.S. hedge fund Livermore Partners, a shareholder in Glencore, said it would soon be in a position to reinstate dividends.

This year, its share price has risen well over 150 percent and it has said it could resume dividend payments in 2017.

"Last November, investors were shorting the bonds and the stock. Here we are, a year later, the bonds are very attractive. It underscores the demand for high-quality yield," Neuhauser said.

But the big miners are still cautious after last year's rout and industry sources say they are likely to use the bond market first of all to strengthen their balance sheets and eventually increase dividends. They are seen as unlikely to embark on aggressive expansion plans.

Glencore said in August it expected to exceed its target to cut debt, but it also took a nearly $400 million hit from a hedge on coal that has denied it the benefits of a very strong rally.

(Reporting by Barbara Lewis in London and John Tilak in Toronto; editing by Ruth Pitchford)

Next In Deals - Europe

Fixed annuity service provider Athene Holding Ltd said its initial public offering of 27 million class A shares raised $1.1 billion after the offering was priced in the mid-point of its expected range, valuing the company at about $7.55 billion.

FRANKFURT German semiconductor chipmaking machinery company Aixtron may sell off part of its business, its chief executive said in an interview published on Friday, opening the door for bidders after a deal with a Chinese company collapsed.